Great things are happening to the stocks in this article. They’re all outperforming the market over the last month because of positive catalysts such as a new product line, constructive news flow, or even a loyal Reddit fanbase.
While momentum can be a leading indicator, it has burned many investors as it doesn’t always correlate with long-term success. All that said, here are three stocks that are likely overheated and some you should look into instead.
Soho House (SHCO)
One-Month Return: +39.9%
Boasting fancy locations in hubs such as NYC and Miami, Soho House (NYSE:SHCO) is a global hospitality brand offering exclusive private member clubs, hotels, and restaurants.
Why Does SHCO Worry Us?
- Sluggish trends in its members suggest customers aren’t adopting its solutions as quickly as the company hoped
- Negative free cash flow raises questions about the return timeline for its investments
- 5× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Soho House is trading at $8.83 per share, or 9.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SHCO.
Offerpad (OPAD)
One-Month Return: +301%
Known for giving homeowners cash offers within 24 hours, Offerpad (NYSE:OPAD) operates a tech-enabled platform specializing in direct home buying and selling solutions.
Why Should You Sell OPAD?
- Sluggish trends in its homes purchased suggest customers aren’t adopting its solutions as quickly as the company hoped
- Cash-burning history makes us doubt the long-term viability of its business model
- Unprofitable operations could lead to additional rounds of dilutive equity financing if the credit window closes
At $4.89 per share, Offerpad trades at 0.2x forward price-to-sales. Check out our free in-depth research report to learn more about why OPAD doesn’t pass our bar.
Astec (ASTE)
One-Month Return: +25.5%
Inventing the first ever double-barrel hot-mix asphalt plant, Astec (NASDAQ:ASTE) provides machines and equipment for building roads, processing raw materials, and producing concrete.
Why Do We Think Twice About ASTE?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 28.2% decline in its backlog
- Gross margin of 23.8% reflects its high production costs
- Poor free cash flow margin of -0.9% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Astec’s stock price of $47.57 implies a valuation ratio of 17.9x forward P/E. If you’re considering ASTE for your portfolio, see our FREE research report to learn more.
Stocks We Like More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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